Standing Committee E

[Mr. Win Griffiths in the Chair]

Health and Social Care(Community Health and Standards) Bill

Schedule 1 - Constitution of public benefit corporations

Evan Harris: I beg to move amendment No. 181, in
schedule 1, page 95, line 22, at end insert 'and their interests,'.

Win Griffiths: With this it will be convenient to discuss the following amendments:
 No. 182, in 
schedule 1, page 95, line 23, after 'directors', insert 'and their interests'.
 No. 132, in 
schedule 1, page 95, line 25, at end insert— 
 '17A (1) The public benefit corporation is to establish a register of interest for those service on the board of governors as directors. 
 (2) The information to be registered shall include relevant financial interests and any political affiliations within the previous five years.'.

Evan Harris: I understand that there is an even greater urgency for us press on, so I shall be very quick.

Stephen Pound: Get on with it.

Evan Harris: I do not know whether the hon. Gentleman will be happy with one minute, but that is how long I shall give to this matter.
 Amendment No. 181 is a very obvious one, as is amendment No. 182. They ensure that a register of interests is set up for directors of, or those who sit on the board of governors of, a foundation trust. That is in line with good practice generally where budgets involving public money are being wielded, or where any large organisation requires transparent accountability. I hope that the Government will not have a problem with it. 
 It is not appropriate for political affiliations to be registered. If this is supposed to be a genuine quasi-democracy of which people seek to be members, we should not discourage those who are interested in local politics; rather, we should do the opposite. The need to declare such interests seems to imply that there is something wrong with them, and that that might be a factor in the poor or inappropriate performance of a governing body or a board of directors. I am not sure that that is the case. I cannot see how political affiliation would be relevant in the running of a governing body. However, I look forward to the hon. Member for Epsom and Ewell (Chris Grayling) setting out why he and his colleagues think that it is necessary, and we will keep an open mind. We did not include that in our amendments because we did not feel that it was necessary. I hope that the Government will see 
 that this is a reasonable and necessary step to take, and I commend the amendment to the Committee.

Chris Grayling: Good morning, Mr. Griffiths. I will also keep my remarks brief on these amendments. The hon. Member for Oxford, West and Abingdon (Dr. Harris) has already indicated broad agreement from the Opposition Benches that some form of register of interests is appropriate. Indeed, in tabling amendment No. 132, we anticipated the Liberal Democrats' amendments and have set out what we believe is the right way to do things.
 It is essential and, indeed, common practice, that those serving in an elected public office in today's world register their interests. Sometimes that requirement goes a little bit too far. As the Under-Secretary will know, in some areas of public life, such as county councils, we have had our doubts about whether that is appropriate. That cannot be the case in this circumstance. We are looking at substantial public bodies with significant turnover of anything up to £100 million or more and at people who will have a role in the governance of those organisations. 
 It seems entirely appropriate that there should be some requirement to register relevant financial interests. That could include directorships of companies that sell services to that organisation or that could, in some circumstances, sell services to a foundation trust, or a directorship or financial interest in another health care organisation. Those are the classic forms of registration that we would go through, and it is entirely appropriate that those people should go through them. 
 I shall touch briefly on the question of political affiliation, which is connected to the points that have been made by Government Members and me about entryism. In using the word ''political'', we are not referring simply to a political party. We did not use the words ''political party'', because, in today's world, the words ''political affiliation'' can have a broader meaning. If someone is a director of a substantial pressure group, is a member of a political party, has held political office or has been appointed to a position by a political party because of specific interests, it is right and proper that those interests should be registered. That is appropriate. 
 For all NHS appointments, it is expected that candidates' political affiliations will be registered and made available to the public. It is not unreasonable that a member of a foundation hospital's board of governors should be required to make the same kind of declaration, particularly given the fact that those boards could be the targets of pressure groups that may want to influence unduly the management of hospitals. It is right and proper that there should be some form of political registration.

Evan Harris: I have listened carefully to what the hon. Gentleman has said. First, would membership of an organisation such as the Society for the Protection of the Unborn Child come into that category? SPUC is often cited as an example in such cases. The hon. Gentleman's explanation suggests that it would not. Secondly, my understanding is that one reason why appointments to bodies such as NHS trusts must
 declare affiliations is for the purpose of transparency; they are appointed positions. There may also be other reasons. That rationale would not apply to members of a board of governors, because those members are elected.

Chris Grayling: In the case of SPUC, let me give the hon. Gentleman a specific example. In recent years, the ProLife Alliance has nominated candidates for election. Candidates have also been nominated for election by other single-issue pressure groups. Surely it is right and proper that someone who stands for election in such a capacity to the board of governors of a local hospital should be required to make such information available, in the same way that a person must declare that he or she is a Liberal Democrat MP, a councillor, or whatever. It is entirely appropriate to do that. It simply means that people declare that they have a political involvement. That information should be in the public domain.
 I can see no reason for any objections to including that amendment in the Bill. It is a simple process; it would mean no more than ticking a box, in the same way as financial interests are declared. In a spirit of openness and in an effort to provide full information about the people who run or steward hospitals, there is no reason why people should not be asked to make such a declaration. We endorse the requirement for some form of registration, a practice that is common in public life. 
 I am sure that the non-inclusion of such information is simply an omission by the Government in the Bill's drafting. I hope that if the Under-Secretary cannot accept the amendments that have been tabled, she will at least give an assurance that she will return with Government amendments that will fill an unnecessary gap in their proposals.

Hazel Blears: The declaration of interests from people who may have a role in NHS foundation trusts is an important issue. ''A Guide to NHS Foundation Trusts'', paragraph 2.24, clearly states:
''The Independent Regulator for NHS Foundation Trusts will publish guidance on eligibility for members to sit as governors on the Board of Governors covering such matters as terms of office, conflict of interest and payment of expenses.''
 We are concentrating on those important matters of probity to ensure that there are no conflicts of interests when decisions are made. Potential conflicts of interest are particularly serious for members of boards of governors and boards of directors who would have decision-making powers in the organisation. 
 However, in accordance with the thrust of schedule 1, we have tried to outline the minimum requirements and have indicated that NHS foundation trusts must make provisions in consultation with local communities. The Bill contains three safeguards. First, there must be consultation and agreement with local communities. Secondly, the Secretary of State must support the application and examine the constitution. Thirdly, the independent regulator must also support the constitution. We expect all NHS foundation trusts to tackle the potential for conflicts of interests in the 
 provisions of their constitutions. That is the proper place in which to include those provisions. I am happy to confirm that, when the Secretary of State considers constitutions, he will be looking for provisions that deal with conflicts of interests and declarations. 
 Clause 23, subsections (4) and (5), contain powers for the independent regulator to intervene if there are any problems. If governors or directors abuse their positions, strong powers are available in the Bill. For that reason, I do not believe that the amendments are necessary, and I ask the Committee to reject them.

Evan Harris: The Under-Secretary's reply is disappointing. It is representative of a general difficulty, which is that when something is suggested by Opposition Members, and perhaps even by Government members of the Committee, for inclusion in the schedule in respect of foundation trusts, the Under-Secretary always says that it should be left to the trusts to solve the problem without including appropriate provision in the schedule. She talks about the need to consult locally and introduce a constitution that must be triply approved.
 The same argument, however, could be applied to anything in schedule 1. It could be applied to the series of measures that the Government have seen fit to include in the schedule concerning foundation trusts and their constitutions. What makes a matter important enough to be included in schedule 1 and not merely to be subject to guidance or the good fortune of trusts getting it right first time and reinventing the wheel? The trusts would face potential problems with the way in which they do that, given that they have to be analysed by the regulator, as we would have it, and the Secretary of State, as the Government would have it. To answer that question, fundamental points must be taken into account in the constitutions, and some of those are laid out in schedule 1. Provision for an appropriate declaration of interests by members of the board of governors should be an essential part of a constitution, perhaps more important than some of the provisions that the Government have seen fit to include in schedule 1. 
 As regards the Government's general answer to amendments that seek to include provisions in the schedule, the Under-Secretary's response is not satisfactory. It would not be appropriate—given the critical role that the Government see the trusts playing—to take chances with the need for trusts to recognise that a register of interests is important. Appropriate provision would bring about proper governance, and there would be seen to be proper governance. 
 I am very disappointed, therefore, with the Under-Secretary's response, but I do not intend to seek to divide the Committee on the matter now because we may return to it either later in the House or in the House of Lords. On that basis, I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn.

Hazel Blears: I beg to move amendment No. 155, in
schedule 1, page 95, line 37, leave out 'or 24'.

Win Griffiths: With this it will be convenient to discuss Government amendments Nos. 147 and 150.

Hazel Blears: Clearly a key part of the policy on NHS foundation trusts is to ensure that the new freedoms that they will have will be underpinned by safeguards to protect the public interest. That is why we will provide for a special failure regime with the primary aim of protecting both the staff and assets required to deliver essential NHS services.
 In the event that a trust is unable to meet its financial commitments, the independent regulator may require it to take steps to obtain a moratorium or to make a proposal for a voluntary arrangement. The provisions relating to the failure regime are set out in detail in clauses 23 to 25. For the insolvency arrangements to operate properly, it is important that creditors are not able to step in in anticipation to recover their debts before the moratorium is properly in place. 
 The amendments therefore ensure that notices to be issued by the independent regulator under clause 24 do not become publicly available, thus alerting creditors and enabling them to take precipitative action. In the particular instance in which a notice requiring a moratorium or voluntary arrangement proposes to limit public access to information about the trust's affairs, it is important that the public have fully spotted the information. However, in these prescribed circumstances it is essential that the notice does not become publicly available until the moratorium is in place. It would then become a matter of public record that that would be kept in place rather than the NHS foundation trust aspect.

Simon Burns: Are these simply drafting amendments to tidy and improve the Bill that were tabled on reflection after the Bill was published?

Hazel Blears: Yes.
 Amendment agreed to.

Evan Harris: I beg to move amendment No. 183, in
schedule 1, page 95, line 41, after first 'corporation', insert 
 'the patients' forum of the trust or a patients' forum of a local primary care trust, or a member of the local Overview and Scrutiny Committee'.

Win Griffiths: With this it will be convenient to discuss the following:
 Amendment No. 160, in 
clause 8, page 4, line 17, at end add 
 'to patient forums in the trust and in surrounding primary care trusts, to overview and scrutiny committees in the local area, and to members of the NHS foundation trust'.

Evan Harris: I am pleased that we are making such rapid progress on these groups of amendments. The discussion on patient forums will come up more appropriately under another clause, so it is not my intention to detain the Committee. In fact, I do not wish to pre-empt that debate. However, it is difficult to speak to this group of amendments without saying something about the importance of wider consultation. I will speak briefly to this amendment, and I will accept if the Under-Secretary wishes to save
 some of her arguments for a later group of amendments.
 The amendments in this group comply with clause 8, which refers to amendments of constitution. Clause 8(2) states that 
''An NHS foundation trust must send a copy of its constitution, and any amendment of it, to the registrar of companies'',
 which includes patient forums and the local overview and scrutiny committee. We will debate the Government's plans to disallow patient forums in NHS foundation trusts. 
 We must remind ourselves that these are patient forums, which—after many arguments and a massive amount of promotion by the Under-Secretary—were introduced in the NHS. Following that, it was proposed that NHS foundation trusts would not have patient forums. It then became apparent that all trusts would soon become foundation trusts, meaning that no trusts would have patient forums. 
 Having spent so much time and energy on a fantastic campaign—it failed to win me over but it clearly impressed Labour MPs—to abolish community health councils, it must be galling for the Under-Secretary to find that the campaign has all been in vain because all trusts will be foundation trusts, meaning that there will be no standard patient forums. Of course, we can leave that argument for a later stage. 
 Does the Under-Secretary think it reasonable that local patient groups that are founded in statute—such as the patient forums of the primary care trusts, which have a significant role in supervising the provision of local services, including the examination of the roles of foundation trusts and members of the overview and scrutiny committee, which in turn have an even more important role in examining the work of foundation trusts—should be charged, as if they were external to the NHS and the basic governance of the trusts, for copies of the documents set out in paragraph 18? 
 Many documents are listed, and there could be a significant cost involved. In the interests of transparency and accountability, it is reasonable that those documents be available free of charge to those organisations that are listed. Similarly, under clause 8, in deference to those organisations, amendments to the constitution must be made clear before they are made. 
 I was unable to resist the temptation of getting into the issue of patient forums, and I apologise to the Under-Secretary for doing so after inviting her not to get into that matter now. However, will she say whether there is merit, as I believe there is, in distinguishing between those people with a statutory duty to look at the governance of a trust—and who, therefore, have unimpeded access to these documents—and other organisations and individuals whom she may feel it is appropriate to charge? It is the Government's policy to levy charges in the NHS where they can, so it would not be a surprise if there were charges for this provision. However, there is a distinction to be made, and I invite the Under-Secretary to look kindly on at least part of the amendment.

Chris Grayling: In my judgment, both of the amendments are wrong. I accept the hon. Gentleman's desire to ensure that information is provided to those who have a professional or official reason for requiring it. However, it seems to me that in this day and age—particularly taking the example set in the House of Commons, Mr. Griffiths—it should be possible for the register to be put online to make it accessible and free of charge to everyone. Therefore, it is my hope that while making this provision in the Bill, Ministers do not really intend for it to be used.
 I see no reason for not making constitutional changes and not making information from registers available online. The majority of the population have access to online information, and the cost of providing information to those who do not have internet access is quite small. Therefore, I hope that trusts will not feel the need to make such a charge. On that basis, I do not agree with the hon. Member for Oxford, West and Abingdon, who was trying to make a distinction. All members of the public should have access to that information. It can be provided free and easily, and so it should be.

Evan Harris: Will the hon. Gentleman address those people who have a legitimate interest, or any interest, but who are not online? We are not in the paradise that he suggests where everyone is online, and I do not think that we can force people to go online. Many people are not able, for good reason, to access information electronically. I hope that the hon. Gentleman will at least concede that there is a problem for those people who choose not to, cannot afford to or cannot access the information in the way that he suggests.

Chris Grayling: The hon. Gentleman clearly was not listening to what I said. I said that foundation hospitals should make the information available without charge to people who do not have access to online information. However, my experience shows that the majority of people involved in local public bodies in today's world have access to e-mail and online services. Allowances must be made for those who do not but, as time goes by, those people will be a small minority.
 Neither of the amendments is necessary. I do not want to strike the provision off the Bill, but I hope that the guidance notes that go out from Departments will make clear what avenues to avoid wherever possible.

Hazel Blears: Again, the schedule sets out the minimum requirements, and in that context I cannot support either of the amendments. It is vital that people have access to information, and that is set out in the Bill. They need to be able to look at the constitution, the forward business plans and the general reports, all of which will drive the process forward. The Bill already secures that in paragraph 18(1) to schedule 1 and in clauses 8 and 10. There is nothing in the Bill that will prevent foundation trusts from putting all their information online if that is what they want to do. The foundation trusts may also decide to issue information and make it more accessible by way of newsletters. I do not think
 that the receipt by every member of an indigestible copy of a fairly complex constitution is the way in which to draw people into the organisation.
 These days, there are much more innovative ways to provide information that is easily understood and accessible. Foundation trusts should not be required to make copies available to every member of all these organisations without having the power to pass on a reasonable charge. We must not confuse that issue with access to the information. The organisations have the right to access that information; in fact, they could not do their job properly without it. Like the hon. Member for Oxford, West and Abingdon, I look forward to further discussion about patient forums and patient involvement in clauses 28 to 30, and the widening and deepening of democracy in the NHS. However, those provisions are overly burdensome, and I ask the Committee to reject them.

Evan Harris: Why is paragraph 18(3) necessary at all? Why must the Under-Secretary defend the resisting of amendments with regard to individuals on whom a reasonable charge may be imposed? Surely that depends on local circumstances. The rules and regulations governing the foundation trusts will be deliberated locally, in consultation with the community, and in a genuine democracy—my tone of voice may not come across in Hansard—and the approach that the trust takes will have to be approved by the regulator, the consultees and the Secretary of State. I am surprised that the Under-Secretary even thinks it necessary to ''talk'' about something so trivial as whether the local corporation will impose a reasonable charge. That might, in parlance, be considered a statement of the bleedin' obvious.

Win Griffiths: Is this a speech or an intervention?

Evan Harris: Sorry.

Hazel Blears: I should draw the hon. Gentleman's attention to paragraph 18(3), which states that
''the corporation may impose a reasonable charge''.
 That is a matter for the corporation to decide.

Evan Harris: The point I was making was that the corporation might impose a reasonable charge without paragraph 18(3). That provision is not needed in the legislation. The inclusion of this sub-paragraph demonstrates that the Under-Secretary's arguments in resisting reasonable amendments so that as little as possible is put in the schedule are spurious. Without that measure, it would still be possible for the corporation to impose a reasonable charge for doing all sorts of things. I should be grateful if the Under-Secretary clarified that a statutory provision was necessary for the trust to impose a charge for releasing information or documents to individuals who are not members.
 It is clear that the Under-Secretary is determined to ensure that for those people who rely on paper copies, and those who serve on patient forums, primary care trusts and scrutiny committees—perhaps those who serve on patient forums of the trust itself, who may not be members—an extra barrier is put in place. It is regrettable that if the Under-Secretary considered it worthwhile to include sub-paragraph (3), she did not 
 feel it worthwhile to exempt in the same sub-paragraph groups of people who need ready access to such documents. I do not seek to divide the Committee at this point, and so I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn.

Hazel Blears: I beg to move amendment No. 156, in
schedule 1, page 96, line 2, at end insert— 
 '( ) But a person may not be appointed as auditor unless he (or, in the case of a firm, each of its members) is a member of one or more of the following bodies— 
 (a) the bodies mentioned in section 3(7)(a) to (e) of the Audit Commission Act 1998 (c.18), 
 (b) any other body of accountants established in the United Kingdom and for the time being approved by the regulator for the purposes of this paragraph.'.

Win Griffiths: With this it will be convenient to discuss the following:
 Amendment No. 72, in 
schedule 1, page 96, line 7, leave out 
 'with the approval of the Treasury'.
 Government amendment No. 157. 
 Amendment No. 99, in 
schedule 1, page 96, line 39, at end insert 
 'such periods to be coterminous with those in paragraph 21(5)'.
 Amendment No. 133, in 
schedule 1, page 97, line 6, at end insert— 
 '(2) Members of the corporation shall have the right to move votes of approval of the annual accounts, annual reports and appointment of the auditor at an annual general meeting and all members present shall have the right to vote on such motions.'.

Hazel Blears: I shall first speak to Government amendments Nos. 156 and 157.
 The additional freedoms of NHS foundation trusts will be balanced by the following framework of safeguards: the independent regulator overseeing NHS foundation trusts; accountability to the local community; the legally binding agreements that will exist with PCTs; and inspection by the Commission for Healthcare Audit and Inspection. 
 In line with that light-touch regime, we want to ensure that the independent regulator's intervention is triggered only when there are problems. In normal circumstances, the independent regulator will rely on the information that he receives both directly from the trust and from the CHAI reports. Inspections of NHS foundation trusts' annual financial reports will be additional important elements of the monitoring process and will be a key means of ensuring that public funds, for which the trusts are responsible, are properly accounted for. It is vital that the accounts are accurate and that they give a true and fair view of the trust to which they refer. 
 That is why we are improving provision for the independent regulator, why we are concerned with accounting requirements, and why we are presenting amendments that allow the regulator to set audit requirements and ensure that NHS foundation trust auditors are properly qualified. Those are the proper safeguards to impose. 
 NHS foundation trusts are also concerned with transferring control from Whitehall to local communities. They will remain part of the NHS, so we must ensure that there is proper accountability and probity for public funds. I reject amendment No. 72, because it is important that the accounts of NHS foundation trusts also accord with general Government accounting standards. 
 Every year, Her Majesty's Treasury prepares whole Government accounts, which include information on public bodies and bodies that are wholly or substantially funded by public money. Those accounts form an important source of information about how public money is used, and, since the principal purpose of NHS foundation trusts is to provide NHS services, most NHS foundation trust funding will come from the public purse. Therefore it is right that the Treasury may choose to include them in the whole Government accounts. 
 It is important that the form and contents of the NHS foundation trust accounts, as directed by the independent regulator, are consistent with Treasury requirements. Even if the Treasury decides not to include NHS foundation trust accounts in the whole Government accounts, it seems eminently sensible for NHS foundation trust accounts to be prepared in a format that is consistent with those of other public bodies so that they can be properly analysed and assessed.

Evan Harris: Will the hon. Lady set out which other co-operatives or mutuals are included in the Treasury accounting scheme? I appreciate that she may not be able to do that now. Are the accounts of housing associations—forms of providers that are taken on a mutual, or at least on a public benefit, basis—included in the Treasury accounting scheme that she set out earlier?

Hazel Blears: Yes. As I said, that information relates to public bodies or to bodies that are wholly or substantially funded by public money. I am not aware of any external mutuals that come under that definition; I doubt that there are any. I am not sure about the accounting provisions for housing associations. I will undertake to provide the hon. Gentleman with that information.
 Amendment No. 99 is unnecessary. If it is sensible for the reports to be prepared over the financial year, the regulators have discretion to ensure that that is the case. That is set out in paragraph 22(3)(c) of schedule 1. 
 With regard to amendment No. 133, paragraph 7(1) of schedule 1 states: 
''More than half of the members of the board of governors are to be elected by the public constituency.''
 The elected governors are responsible for representing the interests of the membership. Therefore it is appropriate that the board of governors exercises powers on behalf of the members whom it represents. We have set up a clear structure in which the membership elects the board of governors, which then appoints the directors. Therefore there is a representative democratic element in the system. 
 In line with their responsibility, the board of governors receives at a general meeting copies of NHS foundation trusts' annual reports, their annual accounts and any auditor's report on them so that it can give its views. If something is seriously amiss, it can notify the regulator that intervention is required. 
 The board of governors also appoints the auditors. There is a clear framework for responsibility and power to rest with the governors, and the role of the members is to elect the governors to represent their views in the organisation. 
 As a matter of principle, it would be wrong for the members of NHS foundation trusts to vote to approve the accounts and the reports, or indeed the appointment of the auditor. They will not be close enough to the decisions that are being taken to enable them to carry out that role properly. The Bill establishes a clear system of electoral representation so that the material presented at the meeting can be considered on behalf of the members. The governors have a responsibility to report to their constituencies so that the decisions that are taken are proper and robust.

Simon Burns: I wish to speak to amendments Nos. 72 and 133.
 Amendment No. 72 is a straightforward probing amendment, the purpose of which will become apparent in future debates that I do not wish to pre-empt. The so-called independent regulator is not as independent as the Government claim. On the question of Treasury approval, is the Minister saying that the Bill's drafting simply follows precedent and that, given that all Government Departments are subject to Treasury disciplines, rules and regulations, this is a purely straightforward insertion into the Bill to make it fluent and consistent with normal practice? 
 Amendment No. 133 is less probing because we seek to ensure that an annual general meeting must be held every year and that all members of the corporation must be invited. All members present must have the right to vote on the approval of the annual reports and accounts and the appointment of the auditor. That will ensure full accountability of the board to its members so that the members will own the corporation rather as shareholders own a private company. That is a positive and welcome step towards general decentralisation and the devolution of powers away from the heavy hand of the centre and, in particular, of the Secretary of State.

Gary Streeter: I rise briefly and humbly to speak to amendment No. 99 in the name of my right hon. Friend the Member for North-West Hampshire (Sir George Young).
 The point may seem trivial, but it is important. The Minister responded to the debate before the arguments were actually made on the amendments. However, I invite her to think again. She will know that under paragraph 21 of schedule 1, foundation hospital trusts must prepare and produce accounts that run to the end 
 of a financial year, which is defined as 31 March in every case. That is straightforward and sensible. Schedule 2, paragraph 6 tells us that the regulator must report to the Secretary of State on his activities during a year, which also ends on 31 March, and that is also sensible and straightforward. However, schedule 1, paragraph 22(3)(c) states that the reports—rather than the accounts—that are to be produced by each foundation hospital trust can run to whichever period the regulator decides on. I find that an unusual provision because it does not seem to be consistent with usual practice nor does it tie in with the filing of the accounts by hospital trusts or with the report that the regulator must make. 
 The point is that in almost every case in almost every organisation that I have ever dealt with, whether in the private or in the public sector, the accounts and the report come together. Indeed, often the report is the introduction to the accounts. However, here we seem to have the possibility of foundation hospital trusts producing accounts up to 31 March, with their reports following later if the regulator so decides or gives them that discretion. Why is that provision in the Bill, as it seems very odd? 
 Secondly, the regulator may find that he has given permission to a hospital trust to file a report for one period, but that he must report to Parliament and to the Secretary of State for the period ending 31 March. His report may, therefore, be incomplete because the foundation hospital trust for which he is responsible has not yet filed its report for that period. 
 That would not be the end of the world, but if the provision remains as it is and if the regulator were to give permission to a foundation trust to file its report for a different date, what would happen? That could create confusion; it could also create the risk of increased costs to produce reports for different periods. That is probably an oversight in the drafting of the Bill, and this is an opportunity to tidy it up.

Patsy Calton: Government amendment No. 156 states that
''a person may not be appointed as auditor unless he (or, in the case of a firm, each of its members) is a member of one or more of the following bodies— 
 (a) the bodies mentioned in section 3(7)(a) to (e) of the Audit Commission Act 1998'' 
 (b) any other body of accountants established in the United Kingdom and for the time being approved by the regulator for the purposes of this paragraph.''.
 Will the Under-Secretary clarify in what circumstances she would envisage sub-paragraph (b) applying to any other body of accountants established in the United Kingdom and, for the time being, approved by the regulator?

Hazel Blears: In reply to the hon. Member for West Chelmsford (Mr. Burns), the amendment seeks to ensure that where public bodies or bodies holding or searching for funding from the public purse are in this position, they are included, or at least can be included, in the whole Government accounts. I understand that that is usual practice to ensure that there is proper accountability for the expenditure of public money. I am sure that the hon. Gentleman will accept that foundation trusts will be delivering services for the
 NHS and spending huge amounts of public money and therefore ought to be properly accountable.
 Amendment No. 133 refers to an annual general meeting to be held to account each year, and it would be up to a foundation trust to specify in its constitution that that would be the case. I am concerned that the amendment cuts across the governance structure set out in schedule 1, which seeks to have representative electoral democracy under which members elect their governors who appoint their directors to make decisions. It is very important to maintain the integrity of that approach, whereas the ability to draw the accounts to the membership as a whole would cut across the governance structure set out in schedule 1. Therefore I reject the amendment. 
 I agree with the hon. Member for South-West Devon (Mr. Streeter) that amendment No. 99 would not spell the end of the world for how we define the periods of accounting and reports. The provision in paragraph 22(3)(c) would allow the regulator some leeway on the periods to which the reports ought to relate; however, if that were to cause difficulty we could have another look at it. It is an attempt to give some discretion to the regulator to consider circumstances. 
 To answer the question of the hon. Member for Cheadle (Mrs. Calton), the amendment seeks to anticipate any changes that would result in other bodies emerging that would need to be endorsed as proper auditors. I am sure that the hon. Lady will agree that it is vital that the auditors who are appointed are people of standing who have recognised skills and abilities, and the amendment will enable us to utilise other bodies, if such bodies were to emerge.

Evan Harris: Why have the Government moved away from trusts' present position, whereby they are subject to district audit—that is, auditors who have been, in effect, appointed by the Audit Commission? Why has she rejected an approach whereby the Audit Commission will not be responsible for appointing the auditors to these trusts? That system has worked well for existing trusts, and there is no reason why it should not do so for foundation trusts, which, as the Under-Secretary said, will spend a great deal of public funds.

Hazel Blears: I draw the hon. Gentleman's attention to the position of higher and further education corporations, which spend a substantial amount of public funds and which are in an identical position in that they can appoint their own auditors. Balance-for-money exercises will still be carried out by the Commission for Healthcare Audit and Inspection.
 It is perfectly appropriate that since we are creating new public benefit corporations, we should allow flexibility in the audit requirements to ensure the standing and probity of appointees. 
 Amendment agreed to. 
 Amendment made: No. 157, in 
schedule 1, page 96, line 12, at end insert— 
 '( ) In auditing the accounts the auditor is to comply with any directions given by the regulator as to the standards, procedures and techniques to be adopted.'.—[Ms Blears.]
 The Chairman, being of the opinion that the principle of the schedule and any matters arising thereon had been adequately discussed in the course of debate on the amendments proposed thereto, forthwith put the Question, pursuant to Standing Orders Nos. 68 and 69, That this schedule, as amended, be the First schedule to the Bill. 
 Question agreed to. 
 Schedule 1, as amended, agreed to.

Clause 2 - Independent Regulator of NHS Foundation Trusts

Andrew Lansley: I beg to move amendment No. 102, in
clause 2, page 1, line 11, leave out 'officer' and insert 'office'.

Win Griffiths: With this it will be convenient to discuss the following amendments:
 No. 168, in 
clause 2, page 1, line 11, leave out 'officer' and insert 
 'office within the Commission for Healthcare Audit and Inspection,'.
 No. 145, in 
clause 2, page 1, line 13, leave out 'Secretary of State' and insert 'NHS Appointments Commission'.
 No. 101, in 
clause 2, page 1, line 13, leave out from 'appoint' to end of line and insert 
 'up to five persons, including a Chairman, on the recommendation of the NHS Appointments Commission, to constitute the Office of Regulator'.
 No. 169, in 
clause 2, page 1, line 13, leave out 'a person' and insert 
 'up to five persons, including a Chairman'.
 No. 98, in 
clause 2, page 1, line 13, at end insert 
 'after consultation with the NHS Appointments Commission'.
 No. 233, in 
schedule 2, page 97, line 16, leave out from 'for' to end of line 17 and insert 
 'five years and he may seek reappointment by the NHS Appointments Commission'. 
No. 140, in 
schedule 2, page 97, line 16, leave out from 'period' to end of line 17 and insert 
 'of five years and he may seek reappointment'.
 No. 184, in 
schedule 2, page 97, line 16, leave out 'Secretary of State' and insert 'CHAI'.
 No. 185, in 
schedule 2, page 97, line 21, leave out 'Secretary of State' and insert 'CHAI'.
 No. 234, in 
schedule 2, page 97, line 22, leave out 'or misbehaviour' and insert ', misconduct or incompetency'.
 No. 141, in 
schedule 2, page 97, line 22, at end insert 
 'subject to approval by resolution of each House of Parliament'.
 No. 142, in 
schedule 2, page 97, line 23, leave out subparagraph (3).
 No. 186, in 
schedule 2, page 97, line 24, leave out 'Secretary of State' and insert 'CHAI'.
 No. 143, in 
schedule 2, page 98, line 2, leave out from 'may' to 'appoint' in line 3.
 No. 235, in 
schedule 2, page 98, line 4, at end insert 
 'subject to the terms and conditions of service as laid down by the NHS Appointments Commission'.
 No. 236, in 
schedule 2, page 98, line 20, leave out '(generally or specifically)'.
 No. 237, in 
schedule 2, page 98, line 23, after 'expenses', insert 
 'from a budget set annually specifically for that purpose from the Department of Health annual budget'.

Andrew Lansley: After only 12 hours of discussion, we have leapt to line 10 on page 1 of the Bill, where we come to clause 2. The purpose of clause 2 is to establish the office of the independent regulator of NHS foundation trusts and to introduce schedule 2. The amendments that we are debating are not concerned solely with clause 2, but stretch into schedule 2 as well. I was tempted for a moment to summarise the purpose of all the other amendments—I had even drawn up a list of them—but thought better of it. Other members of the Committee may like to debate those amendments, as they stray into subjects that are distinct from, although related to, my two amendments. It is those two amendments to which I shall speak.
 The purpose of amendments Nos. 102 and 101 is to change the structure of the office of the independent regulator from one that consists of a person appointed by the Secretary of State to one of up to five persons, including a chairman, that has been appointed by the Secretary of State on the advice and recommendation of the NHS Appointments Commission. Amendment No. 102 would change ''officer'' to ''office'', and amendment No. 101 would do the more substantial job of creating an office of up to five persons appointed on the advice of the Appointments Commission. 
 There are two amendments that relate directly to mine. Amendment No. 169, in the name of the hon. Member for Oxford, West and Abingdon, seeks to appoint up to five persons to the office of the independent regulator, but it would be defective if we did not agree to amendment No. 102. Amendment No. 98, in the name of my right hon. Friend the Member for North-West Hampshire, looks for consultation with the Appointments Commission; his amendment is, to all intents and purposes, similar to part of my amendment No. 101. 
 What is this all about? It is about the manner in which regulators work in government. As my hon. Friend the Member for West Chelmsford said, we will 
 go on to discuss the substance of the work of the regulator and the extent to which the regulator is to be independent. For the sake of this argument at least, let us work on the basis that the regulator is independent and has substantial responsibilities. We can take that as read for this purpose. 
 How should regulators work? This is a non-ministerial department, and I cannot see a major difference between it and many of the other regulators appointed by Government for the purpose of regulating utilities. It is similar to Oftel—or, as it will be—Ofcomm, Ofwat, Ofgem, the Civil Aviation Authority and Postcomm. There are several regulators, most of which were initially established as single regulators. The directors general of the electricity supply, the gas supply, the Office of Fair Trading, Oftel and the water supply were all established as single regulators. However, all of that is changing, Mr. Griffiths. 
 There may be other documents, but the one that I used to establish this proposition was the Better Regulation Task Force's report, which was published in July 2001. The task force studied economic regulation. For these purposes, I dispute any assertion that what is proposed is not a parallel organisation, even though, in the strictest sense, it is not an economic regulator with the same functions as some other economic regulators. The manner in which it works is similar to many other regulators, although it may not exercise competition powers or a price control mechanism. Nevertheless, the organisation's relationship with those who are to be regulated is similar in many respects; it is a sort of licensing process. 
 With regard to the third recommendation, the then chairman of the task force, Lord Haskins, said of the questions that those involved asked themselves: 
''Our final question proved the easiest: there was widespread agreement that regulators should be run by properly appointed boards.''
 The task force's second recommendation concerns the question of whether regulators should be individuals or boards. The task force concluded: 
''Regulatory regimes should be consistent and predictable. There is a trend away from individual regulators to a board structure—we support this development.''
 The task force went on to recommend: 
''The boards of regulatory bodies should include both executive and non-executive members. They should be appointed for their expertise rather than to represent stakeholder groups.''
 The report was published in July 2001, and the Government responded in April 2002. They accepted the broad thrust of the recommendations, and that led directly to the consideration of legislative change in the water industry. 
 I confess that I have not taken the trouble to find the references, but I think that the Water Bill 2003 is changing Ofwat from an individual regulator to a board structure. For my sins, I have spent a considerable time discussing the structure of Ofcom, which will be established as a board. The Utilities Act 2000 established Ofgem on a board structure, where 
 previously there were individual regulators. The Government's response stated that 
''Ofgem introduced a management board structure in advance of legislation—and they believe that their new board structure has increased the legitimacy and authority of their decision making process.''
 The response went on: 
''Ofwat has recently announced the strengthening of its decision making process by announcing its intentions to recruit non-executive directors to the OFWAT Board . . . The Government can see that a move to a more formal board structure could bring benefits.'' 
The Government have accepted that individuals should not be regulators, but that regulators should be boards. They have done so because they want to avoid the personalisation of the role of the regulator. It is one thing for political argument to swirl around the nature of the person who is Secretary of State, but it is another thing for an appointed regulator to be in that position. The Government have accepted the proposition in order to escape that. 
 The Government have also done it to avoid inconsistency in decision making, particularly at the point where individual regulators are changed and there may be something of a through-train between boards. Thus, some board members remain, even though, for example, the chairman or a chief executive of a regulator may change. 
 Also, this is being done to have less arbitrary decision making. In the past, there was not only arbitrary decision making by regulators, but severe tensions that grew up between those who were regulated and the regulator, because it was about personalities and not board structure. The proposal will also create more transparent decision making because the board structure itself will ensure that decisions are the product of open discussion rather than private contemplation. 
 I am nonplussed. When I saw that there was to be an independent regulator, I assumed that it would be an office with a board, because that structure has been adopted in principle across Government. It seems that the Government have not been joined up on this. Richmond house is not 200 yd from the Cabinet Office in this context, but about five years. The Department of Health has not caught up with the way in which regulators work in government. For my sins, I have spent much time discussing how they work. We may later discuss some further aspects of best practice that have not been incorporated into the legislation. 
 However, one thing is perfectly clear; the Better Regulation Task Force and the Government themselves believe that regulators should be in a board structure that combines executive and non-executive members. Those members should be appointed for their expertise rather than on the basis of representing stakeholder interests. That is not reflected in clause 2 or in schedule 2, as it should be. My amendments would move matters in that direction. However, it would be better if the Government were to make a commitment to reform the structure of clause 2 and schedule 2 to ensure that those principles, which are accepted elsewhere in government, are absolutely clear.

Evan Harris: That was an interesting contribution, and a fair point was made. I hope that the hon. Member for South Cambridgeshire (Mr. Lansley) will recognise that much of what he says, although perhaps not all of it, is consistent with the amendments that stand in my name and in the names of my hon. Friends. Our amendments would ensure that the regulator—or the office of the regulator, since it should comprise more than one person—was based within the new Commission for Healthcare Audit and Inspection. I will explain the two main reasons for seeking to do that.
 First, although the NHS may not be said to be over-regulated with regard to the level and depth of quality inspection—too much of which is superficial—it has been well established that there are multiple organisations roaming round the NHS and subjecting it to inspection. In fairness, that point was well made by Conservative spokesmen in other debates. I remember them making the point that a trust might be subject to inspection by a whole group of acronyms—an alphabet soup of acronyms—all allegedly involved in ensuring that qualities improve, whether that be in the current Commission for Health Improvement, the National Patient Safety Agency, the National Clinical Assessment Authority or any of a whole series of organisations. 
 Indeed, one of the reasons why the Government have found it necessary to revisit the Commission for Health Improvement is the need to integrate that with the current National Care Standards Commission in the new inspectorate. It also must be integrated with the Audit Commission's health functions, which is another area in which trusts are liable to be inspected. 
 It is bizarre for the Government to say that they are reducing the number of bodies that will inspect the NHS by integrating the functions of the National Care Standards Commission as they apply to private health care with the Commission for Health Improvement under CHAI, which are then to be merged with the health functions of the Audit Commission. At the same time, a brand new regulator will be set up whose functions, if one looks carefully, will be to consider quality and audit issues. 
 One reason for the amendments is to do what the Government should be doing—to continue the drive to reduce and to streamline the inspection and audit regime in the NHS. 
 The second reason is our strong feeling that a properly independent Commission for Healthcare Audit and Inspection must have the prime role in quality control, inspection and audit in the NHS. The Government's proposals for an independent commission do not provide that independence, but I hope that the Bill will be amended to ensure that they do. An independent, overarching quality control mechanism is vital, and it should apply to the whole of the NHS. We must not create an impression that foundation trusts must reach a different level of quality or have a different system of audit and inspection, except in the matters that make them foundation trusts rather than NHS trusts. Those should not be clinical issues. Most of the quality control, inspection and audit should be in common 
 between foundation trusts and other NHS trusts, if the Government are to be believed that there will not be a beggar-my-neighbour device in the NHS. However, many fear that that will be a consequence of the Government's sham-elitist approach to the selection of foundation trusts.

Simon Burns: I am fascinated by the hon. Gentleman's description of the Government's approach to hospitals applying for foundation status as sham-elitist. Given that his opposition on principle to foundation hospitals is well known through his votes on Second Reading and through some of his comments on the amendments, does the hon. Gentleman support his constituents who are affected by the application of the Nuffield hospital in Oxford for foundation status?

Evan Harris: The hon. Gentleman has difficulty in understanding. If he does not behave himself, I shall be more than willing to send him our policy document, published last year, which sets out our position clearly. [Interruption.] I hear the hon. Member for Ealing, North (Mr. Pound) say that that is a cruel and unusual punishment. It will be a shock for him to see a policy on that issue from an Opposition party.

Win Griffiths: That is not relevant to the amendments.

Evan Harris: Indeed. The document clearly sets out our position on mutuals. The hon. Gentleman's main question on whether there is unreasonable and divisive two-tierism in the selection of NHS foundation trusts and their different means of inspection as set out by the appointment of the regulator versus the Commission for Healthcare Audit and Inspection is relevant to the amendments, and I am keen to deal with it.
 The hon. Gentleman referred to my use of the phrase ''sham-elitism''. We do not oppose elitism if it is based on quality. It is not necessarily bad if one group of hospitals is clearly better; indeed, there should be a process to ensure that every hospital achieves such quality. The Government may select some trusts by claiming that they are better than others. However, such trusts may not be any better as they might have been selected through a sham performance measure, such as the discredited, disbelieved, non-clinically-based, non-evidence-based star-rating system. That is a sham form of elitism. Divisiveness has been created in the NHS for no good reason; it has been created through sham-elitism.

Simon Burns: In light of those comments, will the hon. Gentleman now tell the Committee whether he supports the Nuffield hospital's application for foundation hospital trust status?

Win Griffiths: I hope that the hon. Gentleman will relate his answer to the amendments.

Evan Harris: I have already answered the question as far as the Chairman will allow. I shall send the policy document to the hon. Gentleman, and I shall now press on with the amendments. If the hon. Gentleman has a burning desire to question me about my constituency, I invite him to see me after the
 Committee so that I can him tell all about the Nuffield Orthopaedic Centre NHS trust. If he has the courage of his convictions he will chase after me. I suspect that his interest will vanish.

Simon Burns: In your dreams.

Evan Harris: On that bombshell, we had better move on.
 Our reasons for proposing an office of the regulator within CHAI are that inspection must be streamlined and that a common, overarching and fully independent system of quality control is required. If the Government's opinion that all trusts will gain foundation status is to be believed, CHAI's role in the NHS will be more limited than the role of the Commission for Health Improvement. That is simply because its function for foundation trusts is much more limited than its function for NHS trusts. We shall discuss that issue when we get to that part of the Bill. 
 Establishing an office of the regulator in the mainstream NHS quality, audit and inspection organisation seems to be the appropriate course of action to reassure people that the Government's plans for all trusts to obtain foundation status will not water down the role of a properly independent CHAI in ensuring proper quality control and audit. 
 Amendments Nos. 168 and 169 seek to establish an office of the regulator in CHAI comprising five people and a chairman. Amendments Nos. 184 and 185 make it the responsibility of CHAI, rather than the Secretary of State, to appoint those people. Whether we can get a properly independent Commission for Healthcare Audit and Inspection is a big question, but a regulator appointed by and answerable to CHAI will be genuinely independent.

Chris Grayling: CHAI will have responsibility for monitoring and inspecting the entire NHS—primary care trusts, mental health trusts and hospital trusts. The amendments tabled by the hon. Member for Oxford, West and Abingdon suggest that CHAI should have direct responsibility for the stewardship of one part of the NHS—foundation hospitals. Will he explain why he thinks that that is appropriate? Does having an independent inspector who has a more direct responsibility for the affairs of one part of the NHS than for others not create a distortion?

Evan Harris: The hon. Gentleman makes a fair point. The Government's proposals for foundation trusts are not the same as the Liberal Democrats' proposals in our much sought after document, a copy of which his hon. Friend the Member for West Chelmsford will receive shortly.
 We would rather that the providers in the NHS became mutuals. Early in the process, there were concerns on the one hand about whether moves were being made towards the privatisation of the NHS, and fear on the other hand that there would still be nothing other than direct control by the Secretary of State. The Government's response to those concerns—I am trying to be fair to the Government—was to create 
 the office of the independent regulator as a compromise. 
 That office has duties, set out in the Bill, to prevent major changes to the function and governance of foundation trusts. In that respect, I support what the Government seek to do. However, that is also a way to suggest that the Secretary of State would not exert direct control. In that respect, the hon. Gentleman is correct because, at least superficially, the Secretary of State has less control over foundation trusts, whereas the independent regulator has more control because that is the job of his office. In the case of non-foundation trusts, the Government do not even give the appearance of seeking to reduce the Secretary of State's overweening control over their functions. 
 Our approach for non-foundation trusts—non-mutuals in our terms—and for mutuals is to abolish the target-based culture. All trusts would become independent of the Secretary of State's control; he would no longer set political targets or hoops for trusts to jump through. Our mutual model would be free of that target-based approach. The hospitals that chose not to become mutuals—that would not be imposed on a chosen few by the Secretary of State—would also be free of that control. All trusts would be subject to CHAI to guarantee quality control independently of the Secretary of State. Our vision is coherent, and we seek to do what we can within the Government's structures to amend the Bill to get as close as we can to that model.

Chris Grayling: I am grateful to the hon. Gentleman for giving way again. He articulates an intriguing argument. Does he see a model for what he describes in the financial services industry in delivering services to the community? For example, in that industry there has been for decades a substantial mutual sector, from the major Scottish investment companies to the building societies, with an independent regulator entirely free of Government. It is a de facto private-sector structure without shareholders. Does he envisage us moving towards that model?

Evan Harris: I can speak only to the amendments, which relate to regulation rather than to the structure of the providers. I commend to the hon. Gentleman what we said about public benefit organisations as mutuals. If providers are to have more independence from central control and a new independent regulator—I have tried to explain why I think the Government have sought to have one—they must be seen to be independent of the Secretary of State in a way that is, perhaps, analogous to what the hon. Gentleman suggests. I hope that he will accept that, as far as it goes, as my agreeing with him.
 I have set out why we should like to see CHAI take over the Secretary of State's role as the creator and supervisor of the independent regulator. We have major concerns about CHAI as the Government envisage it, but it is not appropriate to go into that now. We also have concerns about the function of the independent regulator. I hope, but not with a great deal of expectation, that the Government will see that as a better way to ensure true independence for the regulator and, indirectly, more independence for foundation trusts. Even if for policy reasons the 
 Government do not accept what we are doing, I hope that they will at least accept that there is a model here and that they reject it in going for the one that they have chosen.

Simon Burns: Clause 1 and schedule 1 dealt with the critical issue of setting up foundation trusts. Clause 2 and schedule 2 lay out the equally important issue of the so-called independent regulator.
 I listened carefully to the arguments of my hon. Friend the Member for South Cambridgeshire in moving his amendment and found them attractive and convincing. His amendment and ours, Nos. 145 and 235 and, to a lesser degree, No. 237, are an either/or alternative to what the Government propose. He suggests that the way forward is through a board, an approach that, as he said, has precedents. Our more conservative idea is to have a genuinely independent individual regulator. To be frank, I would be more than happy with either proposal. They both improve on the Government proposals. 
 The Government have heralded the entire Bill and the appointment of an independent regulator as a great devolution of power and cutting of the chains from Whitehall to the NHS locally. Local communities will be empowered to far greater governance of their health care without politicians' interference. The Government have done the same thing with CHAI and social services, as will become clear when we develop the arguments on those clauses. 
 On the broad thesis of the Government's argument, I wholeheartedly agree that there should be—I paraphrase from elsewhere—''a weak centre and a powerful locality'', so that local communities provide their own health care and ensure its supply with minimal interference from politicians, who would be tempted and, in the purest sense of the word, corrupted by political considerations. It is therefore right that a health service—provided that it delivers standards and meets requirements laid down by the state—is free from the day-to-day interference of politicians who might distort and damage the provision of health care because of political pressures. 
 The Government have constantly said that the Bill will accomplish that; initially in the acute sector, through foundation trusts. That is why I, and my right hon. and hon. Friends, support the principle of what the Government propose for foundation hospitals. However, from previous debates, from this group of amendments and probably from subsequent debates, we are not convinced that the Government are living up to their rhetoric. The regulator is a classic example. The Government's fashion is to repeat a message over and over again in the hope that people will believe it. They talk constantly about the independent regulator. Indeed, the heading for clause 2 is 
''Independent Regulator of NHS Foundation Trusts''.
 If that were 100 per cent. accurate, the Opposition would not require a debate. We dearly want an independent regulator, whether it is an individual, as the Government envisage in the Bill or—as my hon. Friend the Member for South Cambridgeshire would prefer—a board. Either proposition would be acceptable. The trouble is that the regulator will not 
 necessarily be genuinely independent, as is highlighted by our amendment No. 145. That amendment relates to clause 2 (2), which states: 
''The Secretary of State is to appoint a person to the office of regulator.''
 If the Secretary of State appoints the person to the office of regulator, the system is compromised because the choice of regulator might be determined more by the political considerations of the Secretary of State—whoever that might be—than by the capabilities of the individual to perform the role in a truly independent way. 
 Similarly, the Secretary of State sets the terms and conditions and period of employment for the post of regulator. That is flawed, or potentially could be flawed. As our amendment highlights, the Opposition want the NHS Appointments Commission, not the Secretary of State, to appoint the regulator.

Stephen Pound: This is not a critical point, but conversation in the Viaduct public house on Sunday night turned to the Conservative party's grouped amendments. Several of my acquaintances pointed out that the term ''NHS Appointments Commission'', which the hon. Gentleman used, does not appear in primary legislation. A retired crossing sweeper pointed out that the term ''Special Health Authority'' is used in schedule 7(5)(1) of the National Health Service Reform and Health Care Professions Act 2002. That engendered considerable debate in the Viaduct. As the first term is not recognised in primary legislation, would the hon. Gentleman care to substitute the second?

Simon Burns: I am fascinated; I had never envisaged that the hon. Member for Ealing, North was a sad man. If his remarks are 100 per cent. accurate and he spent Sunday evening in the Dog and Duck—[Interruption.] If he spent the night somewhere in Ealing discussing with the local retired road sweeper the Conservative party amendments that I was to move this morning, I am flattered. First, because that means that someone outside Chelmsford has actually heard of me. [Interruption.] My hon. Friend the Member for Epsom and Ewell (Chris Grayling) must not be cruel. Secondly, I am flattered that our amendments obviously merit so much consideration and attention that the hon. Member for Ealing, North is prepared to discuss them.
 I have just been informed that the hon. Gentleman's remarks are correct. He has made a fair point. However, it is not the end of the world. If the Government accept the principle of what we seek to achieve, they could lend us their draftsmen so that we could re-table the amendments on Report and the Government would then accept them. 
 If the hon. Member for Ealing, North has served on any Standing Committees in the past five years, he will know that one of the problems with being in opposition—this complaint was frequently heard from current Labour Ministers when they were in opposition—is that, sadly, we do not have the benefit 
 of parliamentary draftsmen. We receive excellent help and advice from certain quarters, but, like an author of a book, all the good work that we do is attributed to the help and assistance from those who give us specialist advice, and any slip-ups or flaws are our fault and ours alone. That is the problem with being in opposition, which the hon. Gentleman, if he holds his seat, will find out soon. However, the problem can easily be remedied by re-tabling the amendments on Report. We can then tidy up the Bill to ensure that it is ship-shape and 100 per cent. accurate. 
 The purpose of amendment No. 145 is to remove from the Secretary of State the power to appoint a regulator, in order that that regulator can be truly independent. That power would then be placed in the hands of the body that already exists to make appointments to organisations within the health service, thus ensuring that the appointments process is not clouded by political bias or other influence. The Government set up the body to ensure a more independent approach, whereby people are appointed solely on merit and not because of political considerations—an issue highlighted in the early years of this Government—and to thwart politicians who seek to use the structures of the NHS to stuff it with their placemen. That is why I think that our amendment is superior to the proposals in the Bill. 
 I hope that Ministers will seriously consider that, because I assume that we are united and that the Minister, the Secretary of State and I all want the best person—or persons, if the amendment standing in the name of my hon. Friend the Member for South Cambridgeshire were to be accepted—to be the regulator and to be truly independent. If we are united in that view, and I am sure that we are, surely the Minister must be tempted by the logic and the reasonableness of amendment No. 145. 
 To my mind, amendment No. 233 is equally important. Schedule 2 is the nuts and bolts of the legislation, fleshing out the proposals in clause 2 and giving greater detail on how this system will operate through the mechanics of the process. The purpose of amendment No. 233 is to remove the question of the regulator's terms of employment—rather than the simple appointment itself—from the Secretary of State, because for a piece of legislation that is meant to free the NHS from the control of politicians, the Secretary of State seems to feature quite frequently in giving the orders to set up these schemes, as well as featuring in their operation. Paragraph 1(1) to schedule 2 states: 
''The regulator holds office for the period determined by the Secretary of State on his appointment (or re-appointment) to the office.''
 If we want a truly independent regulator who is cut away from any possibility of political interference, surely it would be reasonable to specify a five-year term of office. If the Department of Health felt that were too long, for a variety of reasons, the term could be for three years, providing that that is a rational and reasonable period and that there would not be too much chopping and changing. We suggest five years; the Department of Health and the Ministers may prefer a three-year term, but we will compromise. 
 The re-appointment of an individual who wishes to serve a further term should be done through the NHS Appointments Commission rather than through the Secretary of State. That is equally reasonable and a logical conclusion if one accepts the principle that the appointment will be made originally by the Appointments Commission and not by the Secretary of State. 
 Amendments Nos. 235, 236 and 237 are consequential to these proposals and again will give the regulator, rather than the Secretary of State in Whitehall, the powers to take certain actions in different areas under the auspices of the NHS Appointments Commission. Amendment No. 234 deals with the way in which the regulator operates and carries out his functions, but the amendment is slightly different in relation to the appointment processes. Paragraph 1(3) to schedule 2 states: 
''Subject to that, the regulator holds and vacates office on the terms determined by the Secretary of State.''
 We wish to see the NHS Appointments Commission do that. 
 Referring to amendment No. 141, paragraph 1(2)(b) to schedule 2 states that 
''the Secretary of State may at any time remove him from office on the ground of incapacity or misbehaviour.''
 Amendment No. 141 seeks to ensure that that must be 
''subject to approval by resolution of each House of Parliament''.
 That is an important safeguard, because it would lock parliamentary approval into the system and would ensure that there was no abuse by the Secretary of State. At this juncture in my comments, I want to point out that I am not talking about the current Secretary of State, because I certainly would not accuse him of that sort of behaviour. I am talking about the Secretary of State as a person unnamed, because there is always the potential for a future Secretary of State to seek to behave in a way that is highly politicised, and unhelpful both to the NHS and to the provision of that sort of legislation.

Chris Grayling: My hon. Friend might recall that there is a precedent for such intervention in recent times, in the dispute between the former Secretary of State for Transport, Local Government and the Regions and the rail regulator at the time of the Railtrack insolvency, when a threat was issued to change the regulator's remit. There are, therefore, immediate precedents for a Secretary of State's trying to intervene and suborn some of a regulator's powers. Hence, the requirement that Parliament should have a veto over any such step is all the more important.

Simon Burns: I am grateful to my hon. Friend for giving us that example of a precedent. It adds to the point that I have been making that one should try to divorce political interference or control from the legislation in order to achieve the Government's oft-stated aim, which one accepts at face value, of devolving powers and creating independence.

Stephen McCabe: Further to that last point, can the hon. Gentleman tell me how many regulators created
 by the previous Conservative Government were subject to the terms that he now proposes?

Simon Burns: The hon. Gentleman must know—as he made the intervention to elicit this reply—that the answer is none. As my hon. Friend the Member for South Cambridgeshire said, the difference with the regulators, as constituted at the time, for the electricity industry, the gas industry, British Telecom or whatever—[Interruption.]

Stephen McCabe: Railways?

Simon Burns: Or the railways. The principle is the same, as the hon. Gentleman is about to find out. In those cases, the Government were dealing with commercial companies that made profits—businesses that were going from state control to more or less total private control in the private market.
 The NHS never has been—and, I hope, never will be—a business in that sense. The NHS is a public service owned by the state and the people, and I trust that it will remain in that position. I have no reason to doubt that it will, regardless of whether there is a Labour or a Conservative Government. For that reason, and because it is a provider of a service and, rightly, a non-profit-making organisation, it should have a regulator. If one accepts the Government's rhetoric—if not their translation of that rhetoric into action—that there should be devolution of power and less political control, one should logically ensure that the regulator is independent of political control. The best way to achieve that is to put the appointment of that person in the hands of an independent commission, as happens in the NHS for a host of other appointments throughout the country.

Stephen McCabe: The hon. Gentleman is tailoring the facts to fit the argument that he wants to advance. He has agreed with the hon. Member for Epsom and Ewell that the rail regulator is an example of what he is talking about. He then lectures me on the fact that the NHS is a public service and is not for profit. He omits the fact that the railways were a public not-for-profit service until his Government privatised them and created these problems in the first place. He did not take any steps to deal with regulators when his party was in power. Why is he trying to add additional features to the regulations now?

Simon Burns: The hon. Gentleman slightly misunderstood what my hon. Friend the Member for Epsom and Ewell said. My hon. Friend was giving an example of where there had been interference, and he was seeking to add weight to my argument that the regulator should be totally independent.
 I will be brief, because I do not want to go round in circles; I want to make progress. The hon. Gentleman, in his enthusiasm to highlight the flaws in my argument, makes a fundamental mistake: in this country, the supplying of electricity, rail transport and telecommunications services are profit-making commercial businesses. People are at liberty to use them or not to use them—although I accept that the choice in electricity provision is restricted because most people want it and need it. 
 Those bodies were transformed as businesses from the state sector to the private sector. The NHS is not, never has been and, I hope, never will be a commercial business. It is a service owned by the people for the people, and for that reason, if we are to have a regulator, such a person should be totally independent and should live up to the rhetoric of the Government, who want to take away politicians' control from the centre. They could amply demonstrate their sincerity in that matter by ensuring beyond a shadow of a doubt that, as is outlined in schedule 2 and clause 2, the regulator is genuinely independent of potential interference, control or influence by any Secretary of State for Health. That is the simple point that I am making, and I hope that the hon. Gentleman has now taken it on board. 
 Paragraph 3(1) of schedule 2 requires the regulator to consult the Minister for the Civil Service about staff terms and conditions of service, and about the appointment of such staff as the regulator may determine are required. Through amendment No. 143, we seek to strip away that requirement, unless there is a justifiable reason why the Minister for the Civil Service must be consulted. The amendment would increase the independence of the regulator. I shall listen carefully to what the Minister says about that, because if there is some legal requirement or some rational reason—depending on what ''consulting'' actually means—I would not want to press the amendment to a Division. 
 The basis of the amendments is to help the Government to create a genuinely independent regulator and to ensure that the proposals work when they are up and running as legislation—assuming that the Bill becomes an Act of Parliament, as the Government envisage it will.

John Hutton: It feels as if it is an awfully long time since I addressed the Committee, and I hope that hon. Members have not suffered too much as a result, as the Committee has been left in the capable hands of my hon. Friend the Under-Secretary of State. I have calculated roughly that if we carry on at the current rate we will need 800 sittings of the Committee to complete our deliberations on the Bill, which would present something of a problem in terms of the programme resolution—I estimate that the Committee would still be sitting in 2007. We need to make more progress today if possible.
 There have been some very good speeches. I congratulate the hon. Member for South Cambridgeshire, who, in a very short speech that should be a model lesson for us all, made a very effective point, which I will address in a moment. 
 Clause 2 sets up the office of the independent regulator, and schedule 2 makes provision for essential operational matters such as staff, pensions and other issues. The independent regulator's powers and functions are set out in subsequent clauses, notably in clauses 3 to 10 and 14 to 26. The Committee will have ample opportunity to discuss all the provisions, which are part of a wider picture. Committee members 
 who have spoken have been correct to draw together those wider threads. 
 I shall now set out the wider picture. Our three principal objectives in setting out the arrangements are: first, to ensure the operational independence of the independent regulator; secondly, to ensure that he or she has the necessary tools to do the job properly; and thirdly, to maintain the overall cohesion and effectiveness of the national health service. It will not come as a surprise to Committee members when I say that I believe that the draft Bill meets all those fundamental objectives. That is the reason why I shall not be asking my hon. Friends to support this group of amendments. I should like to set out my reasons for that. 
 This group of 14 amendments rests on two broad arguments, and the hon. Members for South Cambridgeshire, for West Chelmsford and, to a lesser extent, for Oxford, West and Abingdon set out those arguments when they moved their amendments. The first broad set of assumptions on which the amendments rest is that the independent regulator is not sufficiently independent. That was the theme of the speech by the hon. Member for West Chelmsford. The second argument is that the office of the independent regulator has somehow been misconceived, and that we have set it up inappropriately. That was the theme of the speech by the hon. Member for South Cambridgeshire, who, citing the Better Regulation Task Force report, wants the office of the independent regulator to operate as a committee with a broad structure of five members. The hon. Member for Oxford, West and Abingdon wants the office of the independent regulator to be part of the Commission for Healthcare Audit and Inspection, again with five people appointed. Obviously, five is the magic number. 
 The first of those two broad arguments rests on the traditional conspiracy theory, whereby the Government, in spite of what they say, secretly plan to direct everything from the centre. In my experience as a Minister and as an Opposition Member of Parliament, a familiar theme in Standing Committee debates—no matter what the subject—is that the Government say one thing but do another, and that the Secretary of State will be able to tell the independent regulator what to do at every turn. 
 That is simply not true; any objective reading of the Bill will make that palpably obvious. The second argument, advanced by the hon. Member for South Cambridgeshire, rests on the assumption that the chosen regulatory model will be ineffective for the job. Both those assumptions are wrong. The Bill makes provision for an independent regulator and an effective regulatory regime. The independent regulator is bound by the duty in clause 3 to ensure that he acts in the best interests of the national health service, but he is also under a wider general public law duty to act reasonably and proportionately; otherwise, he has complete discretion to exercise his functions. 
 I must tell the hon. Member for West Chelmsford that the independent regulator is not subject to direction by the Secretary of State. The hon. Gentleman, uncharacteristically, has confused two separate issues. He has confused a group of 
 administrative arrangements that are required by Act of Parliament for the establishment of a non-ministerial body—arrangements connected with the opening of an office, how an office holder is appointed, and so on—with the actual operational independence of the regulator. That is not possible within the architecture of the Bill. 
 The hon. Gentleman carries out his work carefully, and I am sure that he will not be able to find any provision in the Bill relating to the discharge of the regulator's functions that is subject to an overriding direction by the Secretary of State. We have made absolutely sure that there is no such provision in the Bill. It is important for the way in which the new arrangements work that the separation of functions that the hon. Gentleman described exists, and that the freedoms that we are discussing are genuine, but are balanced by appropriate safeguards. 
 On Second Reading and in Committee, the hon. Member for West Chelmsford was unable to reconcile the case for freedoms and the case for safeguards. I am not an absolutist, I am pragmatic about these matters, and the Committee should be pragmatic. The Committee can identify the real and genuine freedoms given in the Bill to foundation trusts to improve the responsiveness of local NHS services but can, at the same time, argue that there is a need for effective safeguards. 
 How will those safeguards be exercised? That is the sixty-four million dollar question. We are clear that it is the job of the regulator to perform that balancing act. He must judge at what point it is necessary for him to intervene. The Labour party is clear—as, I hope, are all my hon. Friends—that in the new NHS it should not be the job of the Secretary of State to get involved in the operational issues affecting the delivery of health care services. That is not what the regulator is there to do, and it is certainly not what the Secretary of State will require the regulator to do.

Simon Burns: I understand that, but there is a problem because interference by Secretaries of State with appointees has set a precedent. I shall give an example from early in the life of the Government when the hon. Gentleman was not a Minister and his Secretary of State was not the Secretary of State. A senior Department of Health press officer was dismissed, and that performance was repeated in several Departments throughout Whitehall. Professional civil servants—not party political appointees—were, in effect, dismissed by Secretaries of State because they did not like what was going on and did not like the independence of those individuals.

John Hutton: With the very greatest respect to the hon. Gentleman, that is not a good analogy. He refers to civil servants employed in Departments. His group of amendments has raised the issue of safeguards that he thinks should be in the Bill and the circumstances that would operate if, for example, the Secretary of State were to dismiss the regulator. It is clear from the Bill's wording that the Secretary of State would not have the right to roll across the terms of the appointment of the regulator or to dismiss him if he felt that the regulator was not discharging his functions appropriately. The Bill does not allow that.
 The Bill makes it clear that the Secretary of State can intervene in the case of misconduct or incapacity. To be fair to the hon. Gentleman, he is rather wide of the mark.

Simon Burns: The Minister is absolutely right. The Secretary of State did not have the authority or the power to appoint senior press officers who were civil servants in the Department of Health. The person mentioned was appointed before this Government came into office. However, my point is that the Secretary of State, even though he had no powers to appoint the press officer, interfered to ensure that he was dismissed. That strengthens my argument that there is a problem if the Secretary of State is responsible for appointing someone, as is the case under the Bill, because, were he so minded and did not like what that person was doing, he could interfere to get rid of him. It would not have to be for misconduct or incompetence, or for any other reason.

John Hutton: The hon. Gentleman has rehearsed his argument, but he is wrong. The Secretary of State does not have that power under the Bill. He has a power, which is an essential safeguard in the wider interests of the NHS, to remove from office the independent regulator if there is some issue about incapacity or misconduct. The hon. Gentleman is building his castle of conspiracy theories, and good luck to him, but we must keep our feet on the ground. It is in the interests of the NHS that the Secretary of State should be able to act in those circumstances. What on earth would we be creating if we did not give the Secretary of State that power? That is a basic and essential safeguard, but the circumstances in which that power can be exercised are clearly contained in the Bill. No Secretary of State could reasonably construe that provision in the Bill as giving him a right to terminate the appointment of the regulator at any time for whatever reason. The hon. Gentleman is barking up the wrong tree.

Gary Streeter: On that point, I have a genuine inquiry. The Minister talks about the Secretary of State's power to remove the regulator, and says that the provisions for removing the regulator are either incapacity or misconduct, but the provisions are ''incapacity'' or ''misbehaviour''. I am not sure that I have seen the word ''misbehaviour'' in statute. Will the Minister explain the legal and statutory application of ''misbehaviour''?

John Hutton: I do not think that I will. That is not a matter for me. That would be an issue for the courts, should it come before them.
 Amendments Nos. 145, 101 and 98 relate to the role of the NHS Appointments Commission. By conferring the functions for appointment of an independent regulator on the Secretary of State, the Bill would allow him to delegate the appointment of the regulator to the NHS Appointments Commission. The question posed by these amendments is therefore whether the Secretary of State should have discretion over the appointment of the independent regulator.

Simon Burns: Under what power?

John Hutton: Under the Bill. The Bill gives the Secretary of State the power to appoint the independent regulator. Under the arrangements for the NHS Appointments Commission, he can delegate to the commission any of his powers of appointment. With respect, therefore, the hon. Gentleman's argument is something of a red herring. The question is not whether the Appointments Commission should or could appoint the independent regulator—because it could do so in future if the Secretary of State delegated his appointment functions to it—but whether there should be flexibility in the appointment. It will not satisfy any Opposition Members, but as a general principle we should reserve some flexibility in these matters, particularly on the appointment of the first independent regulator.
 Amendments Nos. 101, 102 and 169 deal with more substantive issues on the theme that was raised by the hon. Member for South Cambridgeshire. The question is whether the office of the independent regulator should be established with a board structure. The hon. Gentleman cited in support of his argument a very good point from the July 2001 report of the Better Regulation Task Force, which caused some flurry among my officials. He was right to identify the recommendations as relating primarily to economic regulators, whose principal functions concern prices, competition and markets, and it is true that the Government broadly accepted the main recommendations of that report. However, as his hon. Friend the Member for West Chelmsford made clear, the independent regulator is not just an economic regulator; his functions are significantly broader than that. It is self-evident that the independent regulator has some functions that can be described as economic, such as fixing the prudential borrowing limit for each NHS foundation trust—it does not get much more economic than that. In responding to the 2001 report, the Government made it clear that we accepted the principle of its recommendations on economic regulators. 
 The Better Regulation Task Force is examining the role of regulators who have a wider, hybrid role, with economic and other functions. Because we are a listening Government, if the task force recommends that a board structure might be appropriate for the group of regulators, we will consider it. However, there is a reasonable case for proceeding along the lines that we are proposing. That point was endorsed implicitly by the hon. Member for West Chelmsford, who made it clear that the regulator had a wider range of functions. The argument of the hon. Member for South Cambridgeshire rested largely on the regulator being an economic regulator, and that is not the case.

Andrew Lansley: Is the Minister seriously suggesting that, if the Committee were to ask the Better Regulation Task Force whether it believed that the reasons it was promoting a board structure were particular to economic regulation, as distinct from regulation that is not principally economic in character, it would say, ''Yes, this applies only to economic regulators.''?
 The Minister knows perfectly well that the Better Regulation Task Force was considering issues such as 
 consistency, transparency, the predictability of decision making and the ability to draw in different sources of expertise. Those are not particular to economic regulators. Will the Minister acknowledge that in this respect there is no distinction between this regulator and the others?

John Hutton: As is always the case, there is some truth in what the hon. Gentleman says, but it is not absolutely accurate. We must consider the context of the Better Regulation Task Force report. It was clearly talking about economic regulators. I accept that, but I do not want to make a huge issue of it, because we should keep an open mind about the emerging structure of the office of the independent regulator.
 The hon. Gentleman's argument rested on one specific aspect of the Better Regulation Task Force report; however, wider issues are relevant. The hon. Member for West Chelmsford said that we should have a weak centre. I disagree. No part of the system should be weak; all should be appropriate. There is a role for the centre, although it will be different in future. It will be more broadly concerned with setting national standards and not with the operational role of the Department of Health, as has traditionally been the case. 
 The hon. Member for Oxford, West and Abingdon raised his concerns about the office of the independent regulator wanting to be part of the Commission for Healthcare Audit and Inspection. It was pointed out by the hon. Member for Epsom and Ewell that that would introduce a fundamental clash between responsibilities and respective roles, between the investigator and the person who might need to make decisions about the future operation of those NHS entities. In this regard, we should keep those functions separate. The hon. Gentleman said that he was trying to parachute elements of his proposals into our proposals. I wish that he would not do that. We are happy with our proposals as they are, thank you.

Evan Harris: It was scrutiny.

John Hutton: It did not feel like that to me at the time. Perhaps, on reflection, if I have a chance to read Hansard, it may feel a bit more like scrutiny.

Evan Harris: Why does the Minister believe that having the office of the regulator and that duty in the structure of the Commission for Healthcare Audit and Inspection creates a conflict of interest?

John Hutton: The simple reason is that the independent regulator is like a referee for NHS foundation trusts, whereas CHAI has a more investigative role. Amalgamating those two roles could give rise to a conflict of interest, as the hon. Gentleman for Epsom and Ewell rightly said. In relation to—

Evan Harris: Will the hon. Gentleman give way?

John Hutton: I will not give way. I have dealt with that point. The hon. Gentleman can come back to his point later, if he wants to. We can all look forward to that.
 Speaking to amendment No. 142, the hon. Gentleman for West Chelmsford laboured the point ad nauseam that this was a fundamental compromise 
 in the operational independence of the independent regulator. That is not true. The regulator will be paid for by the Secretary of State using public funds. The Secretary of State is ultimately accountable for the use of public resources, and it is right that he has a say in how they are deployed. The hon. Gentleman's argument bordered on the ridiculous. 
 We should have some flexibility on amendment No. 140, which deals with the regulator's term of office. That is my only point on that amendment. 
 On amendments Nos. 143 and 235, of course, the regulator must establish an office and appoint staff. The regulator is the best person to judge what staff and skills are required. The office will be funded by the Government, using public money, and office staff will be civil servants. It is therefore appropriate that the Minister for the Civil Service be consulted on their terms and conditions. That is all that the Bill requires, and it is not unreasonable. There are several precedents in legislation that the Government have enacted and in legislation that the Government of which the hon. Gentleman was a Member enacted.

Gary Streeter: The Minister is talking about a completely new apparatus, which would cost money. I accept that valid inspections cost money. Will there be any corresponding savings in the health service to help to pay for the new apparatus?

John Hutton: Yes, that is our intention, and it will be the case as the regulator takes on new roles and responsibilities. We are not creating a parallel or duplicate bureaucracy. We envisage that there will be further reductions in Department of Health staffing as a result of the creation of the new office of the independent regulator.
 Several other points have been raised, Mr. Griffiths. Briefly, the key point about amendment No. 236 is that the Bill provides for the regulator to delegate his functions to his staff. The inclusion of the words ''generally'' or ''specifically'' is a standard device, which simply makes it clear that the regulator does not have to delegate his function formally on each and every occasion that he wishes a member of his staff to do something on his behalf. It is not a huge issue.

Win Griffiths: Order. As it is twenty-five minutes past eleven—[Interruption.] I apologise; I was misled by a message that was passed to me.

John Hutton: It must have been the effect of my speech on you, Mr. Griffiths. I promise that it is rapidly drawing to a close.
 The final point that I wish to make relates to amendments Nos. 234 and 141. For obvious reasons, we do not anticipate, or want to be in, a situation in which the Secretary of State removes the independent regulator from office. However, in the unlikely event that the regulator becomes unable to fulfil his role, the Secretary of State must be able to act quickly to ensure that the interests of NHS patients, and the wider interests of the NHS, are protected. To create a further delay or another set of obstacles to the process—as, essentially, the amendments would do—would not be helpful if there were a need to act in those limited 
 circumstances in which the incapacity or misbehaviour of the independent regulator arose. 
 The hon. Member for South-West Devon asked me what I meant by misbehaviour, and I declined to give him a verbatim history of the case law and jurisprudence on the subject. I will arrange for him to receive a copy of it, if he would like to peruse it at his leisure. Obviously, he needs to get out more. 
 There are precedents for the choice of such words, including the appointment of the chairman and other members of Ofgem, the rail regulator, the Director General of Water Services and the Director General of Telecommunications. These amendments raise many issues, but Opposition Members' criticism of the Bill as it stands is fundamentally misconceived. However, I accept the general argument made by the hon. Member for South Cambridgeshire that the Government must keep under review the structure and the shape of the office of the internal regulator. We will certainly do that. 
 It will come as no surprise to the hon. Gentleman that we examined a variety of different models that we could use to set up the office of the independent regulator, including the sort of board structure that he suggested. We went for this particular shape because we believe it is the right structure, given the specific roles of the independent regulator and his functions in relation to the wider national health service. However, we are always willing to listen to arguments on how the structure could be improved from the Better Regulation Task Force or others, including Conservative Members and my hon. Friends. However, at present, given where we are and where we will start from, I ask my hon. Friends to reject any amendments that are put to the vote for the reasons that I have given the Committee.

Andrew Lansley: The generous words of the Minister in his opening remarks do not deflect me from the view that amendments Nos. 102 and 101 are an entirely appropriate and fundamentally well-conceived way in which to address the Bill.
 I have made the point that I do not accept for one minute the proposition that this regulator will be so distinct from all other economic regulators that he is required to be one person, as distinct from the board structure. It seems that almost all the arguments that I have ever seen on the reasons why most regulatory structures shift inside government from a single person to a board are equally applicable to this regulator. 
 We will return to that point in the future; we may return to it on the basis of further recommendations from the Better Regulation Task Force. I hope that the Minister will write to the chairman of the task force, David Arculus, about it; if he does not, I will, because I expect to return to the matter. The Government are creating a rod for their own back because, if this argument is presented to the House of Lords in its current form, the noble Lords—who are equally familiar with the argument—will change the Bill. The Government will have to change it later, if they do not do so now. Therefore, I am seeking a down payment from my hon. Friends and from the Government. 
 Amendment No. 102 simply changes the word ''officer'' to ''office''. It is technically consistent with the manner in which the explanatory notes describe the office of the independent regulator, as distinct from an officer. If I may, Mr. Griffiths, I want to press amendment No. 102 to a Division, as a down payment on the fact that the Government will have to reconsider that there should not be ''an officer'' but ''an office''. We will return on Report or at another point to see that that office is properly constituted in a board structure. 
 Question put, That the amendment be made:—
The Committee divided: Ayes 8, Noes 13.

Question accordingly negatived. 
 Amendment proposed: No. 145, in 
clause 2, page 1, line 13, leave out 'Secretary of State' and insert 'NHS Appointments Commission'.—[Mr. Lansley.]
 Question put, That the amendment be made:—
The Committee divided: Ayes 8, Noes 13.

Question accordingly negatived. 
 Clause 2 ordered to stand part of the Bill.

Schedule 2 - Independent Regulator of NHS Foundation Trusts

Chris Grayling: I beg to move amendment No. 238, in
schedule 2, page 98, line 25, leave out 'As soon as possible' and insert 
 'No more than twelve weeks'.

Win Griffiths: With this it will be convenient to discuss the following:
 Government amendment No. 158. 
 Amendment No. 74, in 
schedule 2, page 98, line 28, leave out from 'must' to end of line 29 and insert 
 'lay a copy of the report before Parliament'.
 Amendment No. 243, in 
schedule 2, page 98, line 29, leave out 'who must lay it' and insert 
 'and must lay a copy'.
 Government amendment No. 159.

Chris Grayling: This is a simple set of amendments. Amendment No. 238 would amend paragraph 6(1) to schedule 2, which states that:
''As soon as possible after the end of each financial year, the regulator must prepare an annual report on how he has exercised his functions during the year.''
 The purpose of the amendment is to set a time guide for the regulator to prepare his report. However, if the Government suggested a period other than 12 weeks, we would be receptive to it. We do not believe that the regulator's obligation should be left open-ended; ''as soon as possible'' is a very loose phrase. We hope that Ministers will be slightly tighter in drafting the Bill and will set out a specific time. This is a probing amendment to explore whether Ministers are willing to place such a time stipulation in the Bill. If they are not, perhaps they will tell the Committee what time guidance they are prepared to give to the regulator on the delivery of his report. 
 Amendment No. 74 is designed—I am glad to see that the Government have accepted the principle in their amendment No. 158—to ensure that the report is laid before Parliament before it goes to the Secretary of State. The duty of the regulator is not solely to the Secretary of State; it is also to Parliament. That is tremendously important. My hon. Friend the Member for West Chelmsford set out clearly why we believe the regulator should not be subject to undue control from the Secretary of State. The amendment would provide a small, but symbolic, statement that the regulator should be accountable to Parliament above the Secretary of State. 
 Having read Government amendment No. 158 carefully, we are happy to accept it, as it achieves what we want to do. It allows the Secretary of State to receive a copy of the report, and I have no desire to deprive him or her of that right. I welcome the change and am happy to accept the Government amendment. 
 Are Ministers prepared to put a time limit in the Bill? I applaud their responsiveness on the matter of submitting the regulator's report to Parliament, but I await their response.

John Hutton: I wish to say a few words about the Conservative amendments. First, Government amendments Nos. 158 and 159 will ensure that the independent regulator will be more directly accountable to Parliament for his actions, rather than, as the hon. Member for Epsom and Ewell said, being solely accountable to the Secretary of State. That is appropriate, and it emphasises the proper role of Parliament in those matters. The Government amendments emphasise the independence of the regulator, and I hope that the Committee will
 support them, as they broadly cover the issues dealt with in amendments Nos. 74 and 243.
 However, I cannot advise my hon. Friends to agree to amendment No. 238. The regulator may wish to include in his report to Parliament information that has been taken from financial and annual reports of NHS foundation trusts. As NHS foundation trusts are likely to require some weeks to prepare their reports, it is unlikely that the 12 weeks proposed in amendment No. 238 would give the regulator enough time to study and interpret them and to report fully on them to Parliament. That is, I am afraid, a pragmatic judgment. ''As soon as possible'' has a sense of urgency and immediacy; it means that we wish something to be done as quickly as possible. That is what we wish the regulator to do. However, putting an arbitrary time limit in the Bill could be counter-productive and could undermine the purpose and value of the regulator's report in Parliament. 
 I urge the Committee not to agree to the amendment. I understand that the hon. Member for Epsom and Ewell is trying to elicit from us some understanding of our thought processes on the matter. However, I hope he will understand that rejecting his amendment does not mean that I wish the independent regulator to be unduly delayed. I, too, wish the report to be available to Parliament as quickly as possible. 
 I want the report to be available to Parliament as quickly as possible, but the Committee should take into account the variety of information sources on which the regulator will need to draw to prepare an effective and meaningful report. For that reason, we should give the independent regulator a strong steer that we want the report to arrive as soon as possible after the end of the year. 
 However, we should leave it to the regulator to put together the relevant information that will add to the scrutiny of his role and provide an opportunity for Parliament to judge the effectiveness of the regulatory arrangements, rather than shooting him in the foot by requiring him to produce his report within a specific time. If the Committee insists on that, we may end up with a less than useful report, and that would not be in anyone's interests.

Patsy Calton: In bringing to the attention of the Committee the two amendments tabled by the Liberal Democrats, I must explain that there is no longer a need for amendment No. 243, given that Government amendment No. 158 answers our concerns. My party sought to clarify that amendment by specifying a copy. It was an interesting amendment but, I shall not press it.
 Amendment No. 215 still has—

Win Griffiths: Order. Amendment No. 215 belongs to a different group and will be debated separately.

Patsy Calton: Thank you, Mr. Griffiths.

Chris Grayling: I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Amendments made: No. 158, in 
schedule 2, page 98, line 28, leave out from 'must' to end of line 29 and insert 
 'lay a copy of the report before Parliament, and 
 (b) once he has done so, send a copy of it to the Secretary of State.'.
 No. 159, in 
schedule 2, page 98, line 36, at end insert— 
 '6A The regulator must respond in writing to any recommendation which— 
 (a) is made by a Committee of either House of Parliament, or a Committee of both Houses, and 
 (b) relates to the exercise by the regulator of his functions.'.—[Mr. Hutton.]

Patsy Calton: I beg to move amendment No. 215, in
schedule 2, page 98, line 36, at end insert— 
 'Right to Appeal to Regulator 
 6A Employers of health service staff in nonfoundation trusts affected by decisions made by foundation trusts in respect of their terms and conditions of employment, may ask the regulator to judge if these are a breach of section 26 of the Health Act 1999, as amended by this Act.'.
 I apologise for my somewhat premature attempt to introduce this amendment—I had not noticed the omission of a plus sign between the lines on the Selection List. Owing to the phased implementation of the Bill introducing foundation hospitals, we are concerned that staff may be poached from employers and non-foundation trust hospitals. Amendment No. 215 seeks to deal with cases in which employers find that NHS staff in non-foundation trusts are affected by decisions made in foundation trusts about terms and conditions of employment. The amendment proposes that the regulator judge whether the foundation trusts are in breach of section 26 of the Health Act 1999, as amended by this Bill when it becomes an Act, which will state: 
''It is the duty of Strategic Health Authorities, Health Authorities, Special Health Authorities, Primary Care Trusts and NHS trusts to co-operate with each other in exercising their functions.''
 The Minister should consider the amendment from the point of view of ensuring that section 26 is observed.

John Hutton: I appreciate the motive and intention behind the amendment. I understand that the hon. Lady is simply trying to elicit from me some appreciation of the importance of the issue that she is dealing with, and an explanation of how the Bill tackles it. We all accept that she has raised an important issue. We all want the NHS to work effectively and to co-operate to provide a better health care service for the people of our country.
 However, we must be clear about one thing. We must dispel the myth that there is no competition for staff now. There is competition, and the hon. Lady has raised the difficulties that that causes. That competition will continue, because there is a labour market shortage right across the health care sector for key front-line staff, particularly doctors and other medics. We must address that problem. Unfair competition is taking place, but we do not like to talk about it, and it is often swept under the carpet. 
 I should say two things to the hon. Lady. The new pay deal for the national health service, ''Agenda for Change'', will make those issues much more transparent. NHS employers will no longer have to torture the existing pay system to get the result that they want when they have difficulties recruiting staff. Within that pay deal, all NHS organisations covered by ''Agenda for Change'', whether they are foundation trusts, NHS trusts or primary care trusts, will have significant local flexibility to increase pay when that is needed to deal with recruitment and retention difficulties. 
 As the hon. Lady knows, all applicants for NHS foundation trust status must be early implementers of ''Agenda for Change''. The Secretary of State will not approve an application if that does not happen. We are locking in the benefits and the flexibilities that the new national pay system will give to national health service staff and patients alike. 
 We are alert to the difficulty that the hon. Lady has brought to the Committee's attention, but the question for the Committee is how we deal with it. I say that we should deal with it as we have envisaged in the Bill, which is to give the regulator the powers to ensure that the NHS foundation trusts and the NHS trusts work effectively together. Clause 3 also says that the Secretary of State's responsibilities under sections 1 and 3 of the National Health Service Act 1977 are the overarching obligations of the regulator himself. 
 Clause 27 amends the 1999 Act so that the statutory duty of co-operation and partnership also applies to NHS foundation trusts. I hope that that will bring them into a virtuous circle, and that we shall not retreat into the misjudged and ill-executed internal market of the previous Conservative Administration, which created enormous bureaucracy and a two-tier system. The traditional NHS value of co-operation can continue to influence how the system develops in future, in the new world of more NHS foundation trusts.

Gary Streeter: The Minister is right to say that the hon. Lady has raised an important point, and he is trying to deal with it maturely. Once the Bill is passed, will the NHS foundation trusts have any more flexibility than non-foundation hospitals over what they pay, or over their employees' terms and conditions?

John Hutton: No. The flexibilities and freedom under ''Agenda for Change'' will apply to all NHS organisations. The flexibilities that the hon. Gentleman is huffing and puffing about are significant. For example, they allow NHS employers to increase national salary rates by up to 30 per cent. if there are recruitment and retention difficulties. That is a transparent and obvious attempt to deal with those issues. That flexibility to go up to 30 per cent. above basic rates will be the same for NHS foundation trusts as for NHS trusts.

Andrew Lansley: Addenbrooke's NHS trust, which will be in the first wave of foundation trusts, recognises
 that it would not seek any greater flexibility than is available under ''Agenda for Change''. However, I am afraid that the Minister has not really answered the question asked by my hon. Friend the Member for South-West Devon. Where in the Bill does it say that the regulator is required to apply ''Agenda for Change'' as a maximum degree of pay flexibility, and that he cannot authorise greater flexibility for foundation trusts?

John Hutton: The Bill deliberately does not provide for that; I will come to that point in a minute. The hon. Gentleman has made another useful contribution to the debate. The other myth that surrounds the debate about NHS foundation trusts leading to unfair poaching of staff is the assumption that everyone who wants to be in an NHS foundation trusts wants to do that. There is an assumption that NHS foundation trusts want to be able to undermine local NHS employers, take their best staff and recruit them into the service of the foundation trust. I generally do not believe that to be true. I do not believe that NHS foundation trusts are seeking operational freedoms. During the past few months' discussions they have not argued that to operate more effectively they would need such freedoms.
 However, the hon. Gentleman is correct to say that the regulator will not have the direct power to set the terms and conditions of NHS foundation trust staff—nor should he. Employment contracts are a matter for staff, unions and employers. The role of the regulator, as we envisage it, is not to become involved in the day-to-day issues surrounding the operation of an NHS foundation trust. One could not become more involved in the nitty-gritty of operational issues than by telling the regulator that, regardless of what had been agreed locally, he could decide the terms and conditions of NHS foundation trust staff. Of course we could go down that road, but that would be to put the regulator in a different position from the one that we envisaged. Such an approach would involve regulators in day-to-day managerial and operational decisions, and we should not go down that path. 
 The issue raised by the hon. Member for Cheadle is about how we tackle the potential problem of NHS foundation trusts using their freedoms to undermine the ability of local NHS providers to provide the required level of service for local communities. That can be achieved through the duty of co-operation in clause 27 and the overall obligation of the regulator to ensure that when discharging their functions, NHS foundation trusts continue to keep in mind the overarching principles of sections 1 and 3 of the National Health Service Act 1977—that is the regulator's job. In a nutshell—I apologise to the hon. Member for South-West Devon if I am cutting too many corners in my summary of sections 1 and 3 of the 1977 Act—the aim is to provide a health care service that is comprehensive, and free at the point of use. 
 A neighbouring or adjacent trust could put the argument to the independent regulator that the human resources, freedoms or policies being implemented by a particular NHS foundation trust, if they went beyond ''Agenda for Change'', would so undermine the ability of a local NHS provider to deliver its services 
 effectively—for example, because it was losing its key staff—that the NHS foundation trust could be seen not to be complying with the statutory duty of co-operation in the Bill. That is how that argument could be resolved under the provisions of the Bill, and that is the approach that we have taken, rather than give the regulator an inappropriate power to intervene directly in setting the terms and conditions for NHS staff.

Chris Grayling: Elements of the Minister's argument are odd. He has said, as was reinforced by the comments of my hon. Friend the Member for South Cambridgeshire, that there is an issue. He then says that ''Agenda for Change'' will do the job. If that is the case, why is it necessary to constrain the ability of an NHS foundation trust to set pay and conditions? One imagines that he will accept individual cases in which, for example, a specialist hospital wants to upgrade the pay significantly for a particular type of staff to encourage people to train for that role, as there might be a shortage in future. Surely if the broad problem, as described, does not exist, there is no need to prevent a trust from doing that.

John Hutton: I am not sure that the hon. Gentleman followed my point. Under ''Agenda for Change'', there is a significant latitude and an area of flexibility in the national pay system that did not exist previously, and that will deal with the issue that the hon. Gentleman raised. For the reasons that I have outlined to the hon. Member for South Cambridgeshire, we do not want to give the regulator the role, which was suggested by some, of indirectly setting the terms and conditions of staff.

Chris Grayling: The Minister misunderstands; I was talking about the powers of the trusts, not those of the regulator. Why do trusts need to be constrained in their ability to set pay and conditions? If the Minister is correct, and ''Agenda for Change'' delivers the flexibility that they need, why handcuff the trusts and remove their ability to take detailed decisions about individual clinical issues and staffing problems that might help to solve a local issue in a specialist hospital?

John Hutton: We are going around in circles, and I would rather not do that. However, the hon. Gentleman raised the valid point that we should give freedom and flexibility to deal with local recruitment and retention problems to all NHS employing organisations, whether or not they are foundations trusts. That is what ''Agenda for Change'' does, and that is the benefit of the national pay agreement for NHS foundation trusts. That is why all potential applicants for NHS foundation trust status have agreed to proceed as early implementers of the ''Agenda for Change'' package. There is much in it for NHS employers, whether or not they are foundation trusts.
 The point raised by the hon. Lady is fair and reasonable, and we are alert to the problem that she mentioned. It is in no one's interest, across the NHS, for that type of unfair competition for staff to go unchecked. 
 It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order. 
 Adjourned till this day at half-past Two o'clock.